Social Security: Is This Interesting Trend Reducing Your Benefits?

A recent study suggests that life expectancy is heavily influenced by race and education. Here's why this matters for people on Social Security.

At first glance, it seems that Social Security benefits have nothing to do with race or education, the amount you receive in lifetime payments is simply a function of how much you earned prior to retirement, when you elect to receive benefits, and how long you live.

But it turns out that there's more to this story. Specifically, recent research suggests that the total size of one's lifetime benefits may indeed, at least in part, be determined by race and education.

Race, education, and life expectancyWhat I'm referring to here is a study initiated by the MacArthur Foundation to "better understand the factors that drive past, current, and future trends in longevity."

What the authors found is unsettling. In the first case, they concluded that certain segments of the American population are experiencing decreases in life expectancy.

Between 1990 and 2008, white males and females with less than 12 years of education saw their average life expectancy drop from 74.5 down to 70.5, with a slightly more significant decline for females.

The authors also discovered that the gap in life expectancy between the least- and most-educated segments has grown over the same time period irrespective of race.

In 1990, the segment of highly educated white males outlived its least-educated counterparts by 4.9 years; today the gap is nearly three times as large at 12.9 years.

And a similar story is true for black males, where the life expectancy gap between the least- and most-educated groups went from 6 years to 9.7 years over the same 18-year stretch.

Life expectancy and Social SecurityWhile these trends are disturbing in and of themselves, this is particularly apparent when it comes to Social Security.

I say this for two reasons.

The first is that life expectancy, at least theoretically, should weigh heavily on one's decision of when to take Social Security benefits. Namely, the longer you expect to live, the longer you should try to hold out -- this is assuming, of course, that you have the luxury of waiting.

And second, life expectancy plays a central role in the cumulative amount of benefits that retirees receive from the system -- the shorter your lifespan, the smaller your cumulative lifetime benefits.

The net result is that there is almost certainly a direct correlation between race and education on the one hand and Social Security benefits on the other.

Now, just for the record, this isn't an intentional policy on behalf of the U.S. government. It's rather an innocent consequence of demographics.

That being said, prospective retirees would be smart to keep these factors in mind as you approach the decision of when to begin drawing from the system.